An European Union court ruled that British retailer Marks & Spencer PLC can deduct losses from other countries on its tax bill if the company can't claim the losses in those countries.
Marks & Spencer had challenged the original ruling from a British court that it couldn't take a $53 million tax rebate. The retailer pulled out of continental Europe in 2001 after running up losses during the 1990s, and asked the British government to deduct the losses from its tax bill and took the case to court when Britain refused. Britain's High Court referred the case to the European Court of Justice in 2003.
In its ruling, the EU court didn't say how much Marks & Spencer could claim, or whether its ruling applied to all four years the company is requesting a rebate for. Several similar cases are already waiting in the court system. Faced with the prospect of companies in their own countries demanding repayment of taxes, Germany, Greece, France, Ireland, the Netherlands, Finland and Sweden had backed Britain's case.
In its ruling, the court said that British tax authorities went beyond "what is necessary to attain the objectives pursued," adding that, "the United Kingdom rules apply different treatment for tax purposes incurred by a non-resident subsidiary. They therefore discourage undertakings from setting up subsidiaries in other member states." The court said that such a restriction could be allowed if it was in the public interest, but that countries should be able to prevent companies from shopping around for the best tax deal.
The European Commission is planning to develop plans for a common corporate tax base in 2008, allowing governments several years to decide how taxable assets can be divided and allow each country to apply its own tax rate.
